fob Changes Direction

fob's focus shifts to health and safety information management unit.

CHICAGO  November 29, 2000  Erstwhile raw materials e-marketplace fob announced Wednesday that the company would increase its focus on its MSDSonline business unit, which develops solutions for the electronic management of health and safety information, including Material Safety Data Sheets (MSDS).

At the same time, fob said in a press release that it was indefinitely suspending development of its recently announced ProSource technology, a Web-enabled procurement platform for purchasing industrial raw materials such as chemicals, paper and plastics.

This move is designed to more effectively focus our management team and financial resources toward building a business that will quickly generate cash flow and is positioned for rapid growth, said Patrick Blake, fob CEO and co-founder. The market potential for environmental, health and safety data management has far exceeded our expectations. MSDS documents, for example, are needed in every business that uses chemicals, solvents, paints, adhesives and other industrial products. And with the industry's largest sales force and leading database, we are well positioned to seize the leadership position.

Currently MSDSonline offers a variety of software and services, including tools for managing both inbound and outbound MSDS documents. fob claims that MSDSonline operates the Internet's most comprehensive search engine for MSDS documents. To date, the MSDSonline Web site has more than 50,000 registered users and is growing at a rate of more than 1,200 new users each week.

We project that MSDSonline will be cash flow positive in 2001, Blake said. Unlike other early stage technology companies, fob Inc. remains well capitalized and continues to attract investor interest. Based on our current cash burn rate, we have the financial resources to continue to grow our business for a number of years.

ProSource was initially expected to launch in the first quarter of 2001. As a result of suspending its launch plan, fob expects some staff to be reassigned to support the growing MSDSonline sales, marketing and product development departments. The company also estimates that 30 positions will be eliminated.

It's hard to lose talented people, Blake said. We realize layoffs are common among start-up companies. Still, it's a difficult and unfortunate process. As we focus our efforts, however, we need to be sure that we are maximizing our talents and operating as effectively as possible. We are making every effort to minimize the impact from this decision. The employees we are losing will receive a severance package that includes salary, bonus, benefits and outplacement assistance.

fob had announced on Oct. 26 that it was shutting down its e-marketplaces for chemicals, plastics and paper to focus on the ProSource platform. had launched November 1999, followed by in March 2000 and fobchemicals in June 2000.

In an interview following the Oct. 26 announcement, Blake pointed to two factors that have influenced fob's shifting focus: the change in fortunes for business-to-consumer dot-coms in April 2000, which cast a pall on B2B e-marketplaces in the investment community and dried up funding sources for B2B markets; and the announcements of various industry consortia marketplaces, which put a damper on the ability of third-party marketplaces to attract buyers and suppliers and therefore gain the necessary "traction" they need to survive on transaction fees. In the face of tight funding and reluctant customers, the e-marketplaces have had to adopt new strategies to move their earnings into the black more quickly than previously anticipated.

"I think it is fair to say that the environment has changed dramatically, from what I would call the 'land-rush mentality' to 'path to profitability,'" Blake said. "The rules have changed. It's no longer just a sprint to get public and get the currency. Now you have to actually make reasonable decisions relative to what the ROI is in deploying capital in this direction or that direction."

Blake said he believed fob, which is privately held, had sufficient funds to ensure its survival until it could turn a profit. "We didn't get carried away spending our money," he said. "We have a lot of money in the bank, so I'm feeling pretty good about that. And I don't think your going to hear that from too many people these days. It's ugly out there. It's ugly."